Market Data Bank

Stocks shot up in 3Q2018, returning 7.7% in price appreciation and dividends. Historically, stocks averaged about a 10% return annually for the last eight decades. So, a quarterly return of 7.7% is excellent. The S&P 500 returned a strong 10.8% in the first three quarters of 2018, but it was with more volatility than in recent years.

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STOCKS NEARLY DOUBLED IN FIVE YEARS

The bull market turned 112 months old in September. The likelihood of a bear market — a correction of at least 20% — increases as the bull market grows older. But usual precursors to a bear market — restrictive Fed policy, the likelihood of slowing economic growth, and irrational exuberance — were not evident.

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SECTORS SHOW GROWING APPETITE FOR RISK

With growth expectations rising in each of the first three quarters of the year, American

consumers went on a shopping spree, lifting consumer discretionary and technology stocks to a total return of 17.1%. Raw materials and consumer staples stocks were laggards.

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INDEXES TRACKING 13 ASSET CLASSES

Atop this wide variety of 13 asset classes was the S&P 500 return of 92.1% — more than three times the S&P Global ex-U.S. 28%. It’s testament to U.S. economic resiliency. The surge in U.S. oil supply from the shale-fracking revolution broke oil prices and ample supply of depressed prices for gold and commodities.

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S&P 500 AND POST-WAR EXPANSIONS

At 112-months old, this expansion is just months shy of the 120-month boom of the 1990s, the longest in post-War history. With fundamentals strong, this expansion could become the longest boom in modern history. Recessions can lead to bear markets, but not every bear market was spurred by recession.

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S&P 500 LAST QUARTER VS. PREVIOUS SIX

Comparing last quarter’s 7.7% return on the S&P 500 with performance in the previous six quarters is a snapshot of a bull market. Markets don’t go straight up and a double-digit correction could occur at any time. Recessionary conditions that often triggered past bear markets were not present at the end of 3Q2018.

Past results may not indicate future performance. Indices and ETFs representing asset classes are unmanaged and not recommendations. Foreign Investing involves currency and political risk and foreign-country instability. Bonds offer a fixed rate of return while stocks fluctuate. Investing in emerging markets involves greater risk than investing in more established markets, such as risks relating to the relatively smaller size and lesser liquidity of these markets, high inflation rates and adverse political developments.